Life Cycle based Portfolio Management

ADL Matrix

Summary of the ADL Model. Abstract

Arthur D. Little

The ADL model
from Arthur D. Little is a portfolio management method that
is based on product
life cycle thinking.

The ADL portfolio management approach
uses the dimensions of environmental assessment and business strength
assessment. The environmental measure is an identification of the
industry's life cycle. The business strengths measure is a
categorization of the corporation's SBU's into one of five (6) competitive
positions: dominant, strong, favorable, tenable, weak (and non-viable).
This yields a 5 (competitive positions) by 4 (life cycle stages) matrix.
Positioning in the matrix identifies a general strategy.

In the ADL approach, the
line of business or SBU is not especially defined by a product or
organizational unit. The strategist must identify discrete businesses
by
finding commonalties among products and business lines using the
following criteria as guidelines:

Common rivals

Prices

Customers

Quality/Style

Substitutability

Divestment or
liquidation

This assessment of the industry life cycle stage of each business
is made on the basis of:

Business market share,

Investment, and

Profitability and cash flow.

The competitive position of a firm is based on an assessment
of the following criteria:

Dominant: Rare. Often results from a near
monopoly or protected leadership.

Strong: A strong business can usually follow a
strategy without too much consideration of moves from rivals.

Favorable: Industry is fragmented. No clear
leader among stronger rivals.

Tenable: Business has a niche, either
geographical or defined by the product.

Weak: Business is too small to be profitable or
survive over the long term. Critical weaknesses.